THE UPS AND DOWNS OF THE AMERICAN MARKET - Watch Around

58HISTORYHISTOR
THE UPS AND DOWNS OF
THE AMERICAN MARKET
Source: Switzerland’s foreign trade statistics, Bern. Federal customs department
Percentage share of the American market in the value of Swiss watch exports in the 20th century.
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YHISTORYHISTOR
MIH La Chaux-de-Fonds / Waltham / Library of Congress / Bulova
Swiss brands exported their movements in the early
20th century to get around American protectionist duties.
Despite the faith in market diversification and the
hope that emerging markets like China, Russia
and India will secure the Swiss watch industry’s
future, the current economic crisis highlights the
adage that when the American consumer sneezes,
Swiss watchmakers catch the flu.
Since the mid-19th century, the United States has
been the principal destination of Swiss watches.
During the entire 20th century, Swiss horological
exports to that country totalled 32.8 billion Swiss
francs (USD31bn) or 16.3% of all watch exports. One
franc in six was thus earned in America. Of course,
exports fluctuated according to political, economic
and technological changes, but the importance of the
American market explains the extreme concern at
the shifting American policies concerning watchmaking.
These can be grouped into five broad phases.
1830-1870. There are no reliable statistics on the
American market from the mid-19th century to the
1870s, but it is clear that the big east-coast cities
were the main target of Swiss horological exports
and sustained the expansion of the watch industry
in the Swiss Jura. There are records of Swiss
watchmakers and dealers in the United States in
the late 18th century, including a large colony of
businessmen from Neuchâtel in Philadelphia in the
1790s, and then in New York early in the next century.
The watch business of Auguste Agassiz,
founded in Saint-Imier in 1833 and which later
became the Longines company, illustrates the
importance of the American market. Watches made
by Agassiz were mainly sold to the Americans by
his brother-in-law, Auguste Mayor, who set himself
up as a watch dealer in New York in the 1840s. The
growth of this market from 1830 to 1850 led to what
Swiss historian, Béatrice Veyrassat, calls “the
Americanisation of Swiss exports”. The United
States market was not only the main outlet for
Swiss watch exports in the mid-19th century, but
also expanded vigorously after the American Civil
War. The value of Swiss exports to the United
States grew from around 8.5 million Swiss francs in
1864 to more than 18 million francs in 1872.
The Philadelphia lesson. Although the United
States was responsible for the strong growth of Swiss
watchmaking in the mid-19th century, it also set the
scene for its first crisis. The constant expansion of the
American demand for watches led to the development
of a domestic industry. The two biggest
American watch factories were Waltham Watch and
Eglin Watch, respectively founded in 1854 and
1864. Their production was enormous. Waltham
saw its output rise from 91,000 units in 1872/73 to
882,000 in 1889/90, while Eglin’s soared from
100,000 watches in 1879/80 to half a million a
decade later. In comparison, Longines, then one of
Switzerland’s biggest and most modern watch companies,
produced only 20,000 watches in 1885.
Pierre-Yves
Donzé
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HISTORYHISTORYH
The American Waltham company competed ferociously
against Swiss watches in the late 19th century.
This rise in America’s domestic production had a
dramatic effect on Swiss exports. After peaking at
18 million francs in 1872, Swiss watch exports to
the United States slumped to four million francs in
1877. Swiss watchmakers were quick to react. The
Philadelphia Centennial International Exhibition in
1876 brought home to the Swiss watchmaking
establishment the manufacturing superiority of the
United States, and the ensuing decades saw a dramatic
modernisation of the Swiss factories with the
introduction of machine tools. A few manufacturers
started copying the American success in a more
direct way. One notorious, though rare, example
was Woog & Grumbach of La Chaux-de-Fonds,
which produced counterfeit Waltham watches in
the 1880s and 90s.
However, the more usual response to the strong
American competition and the domination of the
Waltham and Eglin companies was to seek new
markets in Europe, Latin America and the orient. At
the same time the value of Swiss watch exports to
the United States during the 1890s went from a
maximum of 9.8 million francs to a minimum of
3.4 millions in 1898. Although the Swiss watch
industry was expanding, the importance of the
American market was decreasing: from 1885 to
1893 it represented 9.1% of Swiss exports, and
from 1894 to 1900 only 4.6%, subsequently staying
at around 5% until the outbreak of World War I.
The chablonnage era. After World War I, the
United States regained its position as the main outlet
for Swiss horological products. The proportion
of Swiss watch exports to America rose steadily
(except during the economic crisis of 1930 to 1935)
from 5.5% in 1913 to a peak of 49.1% in 1945.
During the 1950s the United States remained
Swiss watchmaking’s main market, accounting for
29.3% of its exports by value.
This new “Americanisation” of Swiss watch exports
was mainly an attempt to avoid high import duties
on finished watches by exporting them in kit form
to be assembled locally – a practice known as
chablonnage. The United States had since the
start of the 20th century imposed swingeing duties
at the behest of the Waltham and Eglin companies,
which had the ear of the Republican Party. Although
trade relations between the United States and
Switzerland during the 19th century were relatively
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ISTORYHISTORYH
Longines advertises to the Americans in New York in the
late 1800s.
America’s Elgin company manufactured 500,000 watches
a year in 1885, while Longines only produced 20,000.
free, the Americans enacted a series of protectionist
measures against watch imports in 1909, 1913,
1922 and 1928. This new policy caused the Swiss
to switch to exporting movements and components.
The number of watch movements exported to the
United States rose from 203,000 in 1900 to 254,000
in 1910 and to 2.3 million in 1920, before dropping
to 1.2 million in 1930 because of the economic crisis.
These movements were assembled and cased
up by American watch dealerships, which, as watch
producers, started to undermine the market dominance
of Waltham, Eglin and Hamilton.
The Bulova company is illustrative of this trend. It
was founded by a Czech immigrant, Joseph Bulova
(1851-1936), who opened a watch and jewellery
shop in New York in 1875 and started importing
Swiss watches in 1887. In 1911, to ensure a direct
supply of Swiss products, the company opened a
branch in Biel, Switzerland, which soon became a
watch-manufacturing workshop. Thus in the mid-
1910s the company had a dual role, manufacturing
in Switzerland and selling in the United States.
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Joseph Bulova (1851-1936) had his watches manufactured
in Switzerland from the 1910s.
However, increasing American import tariffs
encouraged Bulova to transfer some of its production
to the United States and become partly independent
of Swiss manufacturing. In the 1920s it
embarked on an acquisition strategy, buying up
Swiss machine-tool and parts manufacturers. The
expertise thus gained enabled it to open a movement
factory in the United States in the early 1930s,
although it continued to make some movements in
Switzerland to be assembled in America.
In other markets, chablonnage led to a transfer of
technology and the rise of new industrial competitors,
which is why the Swiss watchmaking industry
opposed the practice and the government outlawed
it in 1934. However, the Swiss authorities turned a
blind eye to companies selling watch kits to the
United States because they also maintained production
facilities in Switzerland and thus benefited
the Swiss watch industry. In fact they even encouraged
chablonnage in America and went so far as to
sign an agreement with Bulova in 1948 allowing the
company to produce certain movements there.
Indeed it was the sale of watch kits for assembly in
the United States that made it the Swiss watch
industry’s main market from 1913 to 1960.
Cheap competition. The 1960s and 70s were
another difficult period for Swiss watch firms in the
United States. In 1960 the American market
accounted for 21.6% of Swiss horological exports
by value, but by 1980 this had fallen to 12%.
Accustomed to having a virtual monopoly of the
American market, Swiss watch firms, including
Bulova, found themselves facing new competitors
who flooded the market with cheap pin-lever
watches and then with quartz watches from the
late 1970s. The American Timex corporation
started with low-cost mechanical watches in the
1950s, and then Japanese manufacturers, notably
Seiko, emerged as the main rivals to the Swiss
watchmakers in the sixties.
The American share of Swiss watch exports hovered
at around 10% in the 1980s, except from 1984 to 1987
when it rose to an average of 18.7% due to the Swatch
which became a huge success in the United States.
The final boom. The final and current phase has
seen the United States return as the main outlet for
Swiss watch exports. Even though the mid-eighties
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ISTORYHISTORYH
LO
CO
M
OTI
VE
Bulova was one of the leading names in American
watchmaking in the 1950s.
showed that there was still a market for cheap
Swiss watches, it was the more expensive product
that reconquered the American market. Absorbing
17.9% of exports in 2000 and 17.4% in 2005, the
United States emerged as the locomotive of the
booming Swiss industry at the start of the millennium.
Furthermore the expansion of the American
market for Swiss watches from 1990 coincided
almost exactly with the growth of the United States
trade deficit, as if the Americans, by getting
increasingly into debt, became the major buyers of
Swiss watches and so contributed to the tremendous
prosperity of the industry. The fall was all the
more brutal. The share of the American market
dropped to 13.9% in 2008, allowing Hong Kong to
become the biggest market for Swiss watches at
15.9%. The growing interdependence of the different
global economies makes it increasingly difficult
to diversify into new markets. Yet it might still be
worth betting that the United States will return as
the top market for Swiss watches, at least in the
short term. •
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